Despite a negative reaction from the White House, Louisiana Congressman Richard Baker won't give up on his plan to create a tax-free development corporation, much like the S&L bailout's Resolution Trust Corp., to finance and manage the rebuilding of New Orleans.
In an interview with The Credit Union Journal last week, Baker said he is not deterred by the White House's position and still believes his plan combines several different funding proposals and is the best way to go to reconstruct the famed Jazz City. The Louisiana lawmaker said he is working with state officials and representatives of Wall Street to reformulate and provide more details on his proposal to make it more acceptable to fellow lawmakers and the Bush Administration.
Baker's plan would use about $12 billion already appropriated by Congress to assist in the rebuilding of Louisiana as start-up capital for the Louisiana Development Corp. The funds would be used to buy damaged property for redevelopment. The Development Corp. would float tax-free bonds to attract new investment to expand the pool of available reconstruction funds. "We could use that $12 billion that's already there to leverage more investment," Baker said.
Meantime, Congress was preparing last week to approve a proposal to allow Louisiana and Mississippi to use Community Development Block Grant funding to provide grants of up to $150,000 to homeowners not covered for flood damage. Some lawmakers, though, see this as akin to the much-criticized proposal to allow affected homeowners to buy into the National Flood Insurance Program retroactively. Under the block grant proposal, homeowners that were not insured by the NFIP, the only national flood insurance program, would be eligible for up to $150,000 in grants, but would be required to take out flood insurance going forward under the national program. This is being seen as a back-door way to provide flood insurance retroactively. These grants would not only help homeowners, but credit unions, banks and other lenders who hold billions of dollars in mortgages on the damaged properties.
The Journal's Ed Roberts can be contacted at eroberts
